Many workers in the construction industry see launching their own contracting company as a natural career goal. Becoming your own boss is an excellent way to take more control over your work life and make more money, but starting a business isn't something to take lightly. If you're about to launch yourself into this new world, insurance is one of the first things you'll need to consider.
Like any other business, contractors have unique insurance requirements. Ensuring that your company is adequately insured is essential to protect yourself, your clients, and your assets. Before looking for insurance for your new company, check out these three things that every contractor needs to know about business insurance.
1. State Requirements
Anyone who's worked in construction or contracting for long knows that these fields tend to be heavily regulated by local and state entities. In addition to licensing, most states require contractors to meet certain minimum insurance coverage levels. Unfortunately, these minimums can vary between states, so it's crucial to learn about the requirements in your area.
In most cases, state requirements only cover liability insurance. As with auto insurance, liability helps protect you from legal consequences if you cause damage to someone else's property. You'll need to hold a policy that meets your state minimum requirements, but you may want to consider higher coverage limits for more protection.
2. The Difference Between Insurance and Bonds
Bonds are a complex topic, and it's not surprising that many contractors don't fully understand how they differ from insurance. The situation can be even more confusing since most contractors purchase surety bonds from their insurance companies. These instruments effectively act as another form of insurance, protecting your clients against contractual issues.
However, unlike insurance, the purpose of a bond isn't to guard against damage. Instead, bonds cover issues such as a failure to complete a project or poor quality work. While most contractors won't need to worry about their bonds paying out, bonding provides peace of mind for clients and may also be a local or state requirement in your area.
3. Expanded Coverage Options
While many states may only require general liability insurance, many more types of coverage are available (and often necessary) for contractors. For example, while liability coverage protects your clients, builder's risk coverage protects your assets. This form of coverage helps compensate you if anything happens to materials or equipment on your job site.
Of course, there are many other policies you may need to consider, including worker's compensation, commercial auto insurance, and more. The best way to determine the coverage your business requires is to work with a reliable and experienced insurance company that can provide advice and guidance.
Contact an insurance agent if you have questions about business insurance.
Insurance is something that I carry in the hopes that it never has to be used. Along with life coverage, I also have low cost auto insurance and a health plan through my employer. I'm toying with the idea of adding some additional coverage, just in case something happens and I'm no longer around to take care of my family. The question that is on my mind is how much insurance is enough? Do I really need more, or would it be better to cultivate other assets that my loved ones can draw on if needed? If you are in the same boat, let's journey together for a while. Read on and I'll explain what I'm trying and why. Together, we can figure out when it is time to add more coverage and when enough really is enough.